Which Company Will Be Worth More In The End: Dropbox Or Box?

I was a very early employee at Box, so I’ve been thinking a lot about this question, and my answer is obviously biased. All the information I am using to answer the question is public. This is just my personal view on the matter.

First, it seems this question started to become more common in the past few months. Even a year ago, the vast majority of people would have said Dropbox would be the certain winner. But the question highlights a change that is happening now due to multiple reasons. Mainly, I would say Dropbox is slightly overhyped, Box undervalued.

Second, I think both companies will be extremely successful. The two companies evolve in a massive market, where incumbents have been slow to innovate, and there is definitely room for several large players in the space. The two companies also have great products, with slightly different focus (Box is clearly SMBs and Enterprise, Dropbox is more consumer and SMBs, and recently trying to push to the Enterprise market). The two companies also have great cultures and amazing leadership.

However, I think ultimately Box will win and has a unique chance to become a huge company. Here is why:

Box is focused. Dropbox still needs to find itself. Box started to switch to the Enterprise market in the summer of 2007 and started to focus solely on this market early 2009.

Dropbox on the other hand is still struggling to make the decision. In 2012, according to Dropbox’s CEO, they were still doing “photo stuff, and business stuff.”

Not only does the focus help Box better answer specific needs of business users, hire people who understand the market better, and drive all business decisions and strategy (acquisitions, partnership, marketing…), but it’s also a much clearer message to deliver when you are a public company (both companies will most likely be public in the coming years).

Box knows the struggle. Dropbox will soon discover it. Up to this point, Dropbox had a stellar path. Everything they did from their first teaser video is an example of what to do. They have always been the poster child of Silicon Valley.

Box on the other hand had a much slower start. I met a late stage VC a few month ago. When I told him I was at Box from 2006 to 2009, he said “Ha. You went through the struggle.” Yes I did! And I think this will serve the company in the long run: the enterprise market is rough and continuously going through massive changes. Box knows how to deal with this and has it in its DNA.

As I said in the introduction, people are starting to review their opinion of Dropbox for a good reason. Plus, Dropbox highlighted their impressive number of users (200m today), but this might not be a good proxy for success. Yes, these users are a great way to penetrate the enterprise. But, I always wondered how many of these were “fake” users (fake referrals of people inviting themselves to get more storage). Also, my guess is that the growth will significantly slow down in the very near future as more options become available to consumers and large companies like Google and Microsoft will be able to distribute similar products through their OS (desktop and mobile). I think Dropbox will soon be forced to make big decisions, and I’m curious to see how they execute on that.

Box sells collaboration, platform, and the future. Dropbox sells storage. A very early assumption that Aaron Levie and Dylan Smith made was that storage would become a commodity. The consequence is that Box never really had storage as the primary value proposition for the product. Instead Box focused on making sure to add features around raw storage (sharing, collaboration, platform) to make sure a file hosted on Box had more value than anywhere else.

Dropbox has an amazing sync client, that people loved from day one. To this day, they are still selling storage (you upgrade when you need more GB). This puts them under extreme competitive pressure from large companies that can subsidize their storage product to offer a more competitive $/GB. Dropbox can then only catch up on price. The other consequence of this is that Box’s margin are way higher than Dropbox’s (people use less storage on Box than on Dropbox).

In summary, Box was the first to enter the enterprise market, and this will be a long term advantage. First, because if it can continue to grab market share, it will be difficult for companies to switch to other solutions. Second, because my guess is that Box will use this enterprise user base to start selling new products that are based on storage (collaboration, productivity, …). Third, because Box’s team has huge ambition, and the vision, power, and leadership to realize it.

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